Judgments - Owners of cargo lately laden on board the ship or vessel "Starsin" and others (Original Respondents and Crossappellants) v. Owners and/or demise charterers of the ship or vessel "Starsin" (Original Appellants and Crossrespondents) and two other actions, [2003] UKHL 12

LORD BINGHAM OF CORNHILL

My Lords,

1. On 8 December 1995 the vessel Starsin sailed from the Far East bound for ports in Western Europe. Among other cargoes the vessel carried a number of parcels of timber and plywood the condition of which deteriorated progressively and seriously during the voyage because they had been negligently stowed before the voyage began. These parcels were carried pursuant to contracts of carriage contained in or evidenced by a series of transferable bills of lading of which the respondents, on different dates, became the holders. It is convenient to describe the respondents as "the cargo owners". They made claims for damage to the cargo against the appellants, the owners and demise charterers of the vessel, between whom it is unnecessary to distinguish and to whom I shall refer as "the shipowner". The vessel was, at the time of this voyage, on time-charter by the shipowner to Continental Pacific Shipping ("CPS"), which at the time operated a liner service between the Far East and Western Europe, but which has since become insolvent. This appeal by the shipowner and the cross-appeal by the cargo owners raise questions which, compendiously expressed, are whether the shipowner is liable to the cargo owners under these bill of lading contracts and, if not, whether it is liable to any of the cargo owners to any (and if so, what) extent in tort.

2. The facts are well summarised in the judgments of Colman J sitting in the Commercial Court ([2000] 1 Lloyd's Rep 85) and the Court of Appeal ([2001] 1 Lloyd's Rep 437, [2001] EWCA Civ 56) and those summaries need not be repeated. It is enough to note that the various parcels of timber and plywood were shipped on board the vessel at 3 ports in Malaysia for carriage to Antwerp and Avonmouth under 17 bills of lading of which each of the 4 cargo owners (Makros Hout BV, Homburg Houtimport BV, Fetim BV and Hunter Timber Ltd) became the holders of 2 or more. Save in certain respects, specifically mentioned below (paragraph 38), it is unnecessary to distinguish between the various cargo owners. There were some differences between the various bills, but these differences are not material to any issue arising on the appeals. It is convenient to confine my description to a single bill, one of the Makros Hout bills, which I shall call "the bill" and treat as generally representative of all the bills sued upon.

3. The bill was in familiar form. It had 2 sides, a face and a reverse. On its face, the bill contained in its top left-hand corner a box with the heading "Shipper" into which the name and address of the shipper under the bill was typed. Below that box was the heading "Consigneee", and here was typed "To order of Hongkong Bank Malaysia Berhad". Below that was a box ("Notify address") into which the name and address of Makros Hout were typed. Below that was the heading "Vessel" and in that box was typed "MV Starsin V.CP144", the latter abbreviation standing (it appears) for "Voyage Continental Pacific No 144". The ports of loading and final destination were typed into boxes provided to contain that information. On the top right-hand corner of the face of the bill was the bold heading "Liner Bill of Lading" with a notation making abbreviated reference to the ports of loading and discharge. Below that, much more prominent than any other entry on the face of the bill, was a logo and the printed words "Continental Pacific Shipping". Below the entries so far described, also on the face of the bill, particulars were typed in, as supplied by the shipper, of the marks, numbers of packages, description, weight and measurement of the goods. Below these particulars a box was provided for details of freight and charges to be entered, and "Freight prepaid" was typed in. To the right of this box was a printed statement to this effect:

"SHIPPED on board in apparent good order and condition, weight, measure, marks, numbers, quality, contents and value unknown, for carriage to the Port of Discharge or so near thereunto as the Vessel may safely get and lie always afloat, to be delivered in the like good order and condition at the aforesaid Port unto Consignees or their Assigns, they paying freight as indicated to the left plus other charges incurred in accordance with the provisions contained in this Bill of Lading. In accepting this Bill of Lading the merchant expressly accepts and agrees to all its stipulations on both pages, whether written, printed, stamped or otherwise incorporated, as fully as if they were all signed by the Merchant.

One original Bill of Lading must be surrendered duly endorsed in exchange for the goods or delivery order.

IN WITNESS whereof the Master of the said Vessel has signed the number of original Bills of Lading stated below, all of this tenor and date, one of which being accomplished, the others to stand void."

4. Below this statement were boxes providing for details (which were inserted) of the place where freight was to be paid, the number of original bills, the description of the particular bill and the place and date of issue of the bill. Lastly, in the bottom right-hand corner of the bill was a box with the printed heading "Signature". In that box there was typed "As Agent for Continental Pacific Shipping (The Carrier)", below which words was a rubber stamp ("United Pansar Sdn Bhd"), that being a company which acted as port agent for CPS at Kuching (the port of loading under the bill), and across the box were what appear to be 2 manuscript signatures.

5. On the reverse of the bill was a prominent printed heading "Company's Standard Conditions", below which 35 conditions were set out, in 2 dense columns, in print which was very small but just legible by a painstaking and persistent reader. Particular reliance was placed on conditions 1 (the definitions clause), 33 (the identity of carrier clause) and 35 (the demise clause). In some of the bills certain of the conditions became garbled in the printing, giving rise to obvious errors of spelling, punctuation, grammar and meaning, but I do not think it is in doubt that these 3 conditions should be treated as reading, in all the bills, as follows:

"1 DEFINITIONS In this Bill of Lading both on the front and on the back the following expressions shall have the meanings hereby assigned to them respectively, that is to say

(a) 'shipper' includes the consignees, the receiver, and the owner of the goods, also the endorser and the holder of the Bill of Lading, also the endorsee and the holder of the Bill of Lading

(b) 'receiver' includes the consignee and the owner of the goods, also the endorsee and the holder of the Bill of Lading

(c) 'Carrier' means the party on whose behalf this Bill of Lading has been signed

33 IDENTITY OF CARRIER The Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the vessel named herein (or substitute) and it is therefore agreed that said Shipowner only shall be liable for any damage or loss due to any breach or non-performance of any obligation arising out of the contract of carriage, whether or not relating to the vessel's seaworthiness. If, despite the foregoing, it is adjudged that any other is the Carrier and/or baileee of the goods shipped hereunder, all limitations of, and exonerations from liability provided for by law or by this Bill of Lading shall be available to such other. It is further understood and agreed that as the Line, Company or Agents who has executed this Bill of Lading for and on behalf of the Master is not a principal in the transaction and the said Line, Company or Agents shall not be under any liability arising out of the contract of carriage, nor as Carrier nor bailee of the goods

35 If the ocean vessel is not owned by or chartered by demise to the Company or Line by whom this Bill of Lading is issued (as may be the case notwithstanding anything that appears to the contrary) this Bill of Lading shall take effect only as a contract of carriage with the Owners or Demise Charterer as the case may be as Principal made through the Agency of the said Company or Line who act solely as Agents and shall be under no personal liability whatsoever in respect thereof."

Reliance was also placed in argument on condition 5 of the printed conditions, but it is convenient to defer quotation of that condition until later in this opinion (see paragraph 20 below).

The first issue

6. The first and most crucial issue between the parties on these appeals is whether the contracts to carry these various parcels of cargo were made by or on behalf of the shipowner, as the cargo owners contend, or by or on behalf of CPS, the charterers of the vessel, as the shipowner contends. Put another way, the question is whether these were shipowner's bills or charterer's bills. Colman J held that they were charterer's bills and that CPS was the contractual carrier: [2001] 1 Lloyd's Rep 85. On appeal, the Court of Appeal was divided: [2001] 1 Lloyd's Rep 437. Rix LJ agreed with the trial judge. But Sir Andrew Morritt V-C and Chadwick LJ held that they were shipowner's bills and that the shipowner was the contractual carrier, entitling the cargo owners to sue in contract for any recoverable loss they had suffered.

7. In submitting that these bill of lading contracts should be understood as having been made with CPS, Mr Gee QC for the shipowner relied above all on the form of signature on the face of the bill: the port agents signed expressly "As Agent for Continental Pacific Shipping (The Carrier)". Thus the contract was made on behalf of CPS as the party undertaking to carry the goods. The "Carrier" was defined in condition 1(c) to mean "the party on whose behalf this Bill of Lading has been signed", namely CPS. If there was inconsistency between that unambiguous statement of CPS's role just above the signature and general descriptions elsewhere in the text, the former should be regarded as the "dominating factor" and as of "preponderant importance": Universal Steam Navigation Company Ltd v James McKelvie and Company [1923] AC 492, per Lord Shaw of Dunfermline at p.499, per Lord Sumner at p.500. Words which the parties have themselves chosen and written into the contract should have greater effect than printed standard terms: Glynn v Margetson & Co [1893] AC 351.

8. In submitting that these were shipowner's and not charterer's bills, as the Court of Appeal majority had held, Mr Milligan QC for the cargo owners relied on a number of features of the bill clearly indicating that it was intended to take effect as a contract entered into by the shipowner. Provision was made on the face for signature by the master of the vessel, a strong although not conclusive pointer towards an owner's bill: Wehner v Dene Steam Shipping Co [1905] 2 KB 92 at 98; The Rewia [1991] 2 Lloyd's Rep 325 at 333. The attestation clause made reference to all the stipulations of the bill "on both pages, whether written, printed, stamped or otherwise incorporated". Conditions 33 and 35 in particular, but also other conditions in the bill such as conditions 16 and 17, were intended to make plain that the contract of carriage was made with the owner (or demise charterer) of the vessel, with whom sole liability should rest to the exclusion of any liability falling on the charterer or any agent. Thus Mr Milligan submitted that on a proper construction of the whole of the bill the shipowner should be held to be the contracting party, perhaps by regarding the shipowner as the disclosed but unnamed principal of CPS, perhaps by construing the contract as made with the shipowner as well as CPS, perhaps because the description of CPS as carrier was unauthorised by CPS and so ineffective. There is in my opinion no evidence to show that CPS contracted as agent for the shipowner as disclosed but unnamed principal, and the terms of the signature are inconsistent with that suggestion. There is, again, nothing to suggest dual liability in CPS and the shipowner; the standard conditions are expressed in the singular throughout, with no provision that the singular shall include the plural. There is no evidence to show that the port agent lacked authority to sign in the terms it did. But the problem of construction remains.

9. When construing a commercial document in the ordinary way the task of the court is to ascertain and give effect to the intentions of the contracting parties. Here, the task is to ascertain who, on one side, the contracting party was. But a similar approach is appropriate. Mr Milligan urged that the House should not seize on a single canon of construction and give it effect to the exclusion of all others. I am sure that warning is salutary. But there are a number of rules, some of very long standing, which give valuable guidance.

10. First is the rule to which Lord Halsbury alluded in Glynn v Margetson & Co [1893] AC 351 at 359, "that a business sense will be given to business documents". The business sense is that which businessmen, in the course of their ordinary dealings, would give the document. It is likely to be a reasonably straightforward sense since, as Lord Mansfield famously observed (Hamilton v Mendes (1761) 2 Burr 1198 at 1214, 97 ER 787 at 795),

"The daily negotiations and property of merchants ought not to depend upon subtleties and niceties; but upon rules, easily learned and easily retained, because they are the dictates of common sense, drawn from the truth of the case".

In the present case, the suggestion that CPS contracted jointly on its own behalf and on behalf of the shipowner loses credibility when one notes that this possibility, although not objectionable in legal principle, first occurred to a member of the Court of Appeal during argument: [2001] 1 Lloyd's Rep 437 at 452, para 75.

11. Secondly, it is common sense that greater weight should attach to terms which the particular contracting parties have chosen to include in the contract than to pre-printed terms probably devised to cover very many situations to which the particular contracting parties have never addressed their minds. It is unnecessary to quote the classical statement of this rule by Lord Ellenborough in Robertson v French (1803) 4 East 130 at 136; 102 ER 779 at 782, cited with approval by Lord Halsbury in Glynn v Margetson [1893] AC 351 at 358 and by Scrutton LJ in In re an Arbitration between L Sutro & Co and Heilbut, Symons & Co [1917] 2 KB 348 at 361-2.

12. Thirdly, it has long been recognised by very distinguished commercial judges that to seek perfect consistency and economy of draftsmanship in a complex form of contract which has evolved over many years is to pursue a chimera: see, for example, Simond v Boydell (1779) 1 Dougl 268; 99 ER 175; James Nelson & Sons Ltd v Nelson Line (Liverpool) Ltd [1908] AC 16 at 20-21; Hillas & Co Ltd v Arcos Ltd (1932) 43 Ll. L. Rep 359 at 367; Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240 at 245. The court must of course construe the whole instrument before it in its factual context, and cannot ignore the terms of the contract. But it must seek to give effect to the contract as intended, so as not to frustrate the reasonable expectations of businessmen. If an obviously inappropriate form is used, its language must be adapted to apply to the particular case: The Okehampton [1913] P 173 at 180, per Hamilton LJ.

13. Fourthly,

"In all mercantile transactions the great object should be certainty: and therefore, it is of more consequence that a rule should be certain, than whether the rule is established one way or the other. Because speculators in trade then know what ground to go upon": Vallejo v Wheeler (1774) 1 Cowp 143 at 153; 98 ER 1012 at 1017.

This observation is, I suggest, particularly pertinent where the issue is one which, like that now under consideration, has been the subject of repeated litigation over the years in cases which have included The Berkshire [1974] 1 Lloyd's Rep 185; The Venezuela [1980] 1 Lloyd's Rep 393; The Rewia [1991] 2 Lloyd's Rep 325; MB Pyramid Sound MV v Briese Schiffahrts GmbH (The Ines) [1995] 2 Lloyd's Rep 144; Sunrise Maritime Inc v Uvisco Ltd (The Hector) [1998] 2 Lloyd's Rep 287; and Fetim BV v Oceanspeed Shipping Ltd (The Flecha) [1999] 1 Lloyd's Rep 612. In his accomplished extempore judgment in the last of these cases, on a form of bill and on facts indistinguishable from the present, Moore-Bick J concluded that the contract of carriage was made with the owners of the vessel and not with CPS, a decision which Colman J declined to follow in the present case.

14. It is plain, for reasons which Mr Milligan gave, that the bill was drafted to express or evidence a contract between the shipper (and any transferee of the bill) and the owner of the vessel. Conditions 33 and 35 so state. The provision for signature by the master of the vessel so indicates. But a very cursory glance at the face of the bill is enough to show that the master has not signed the bill. It has instead been signed by agents for CPS which is described as "The Carrier". I question whether anyone engaged in maritime trade could doubt the meaning of "carrier", a term of old and familiar meaning, but any such doubt would be quickly resolved by resort to the first condition overleaf in which the term is defined to mean the party on whose behalf the bill of lading has been signed, that is, the party contracting to carry the goods.

15. I can well understand that a shipper or transferee of a bill of lading would recognise the need to consult the detailed conditions on the reverse of the bill in any one of numerous contingencies which might arise and for which those conditions make provision. He would appreciate that the rights and obligations of the parties under the contract are regulated by those detailed conditions. But I have great difficulty in accepting that a shipper or transferee of a bill of lading would expect to have to resort to the detailed conditions on the reverse of the bill (and to persevere in trying to read the conditions until reaching conditions 33 and 35) in order to discover who he was contracting with. And I have even greater difficulty in accepting that he would expect to do so when the bill of lading contains, on its face, an apparently clear and unambiguous statement of who the carrier is.